Investing in shares

Answered according to Hanafi Fiqh by Muftionline.co.za

Q: I have been investing in shares since the past two years and i’ve earned good amounts of profit so far. I have been investing keeping in mind these points most contemporary scholars including Mufti Taqi Usmani have agreed upon which are:

1) The main business of the company must be lawful (halal). Therefore, to purchase shares of a company whose main business is unlawful, such as interest bearing banks, insurance companies, companies manufacturing and selling liquor, etc would not be permitted.

2) Many companies, despite their main business being Halal may be involved in interest dealings in one way or another. Due to this, the following is necessary:

a) One should object to the interest dealings, preferably in the annual AGM. By doing so, the responsibility will be deemed fulfilled.

b) When the dividend is distributed, the proportion of the company’s income which was gained by interest dealings must be given in charity without the intention of receiving reward, as is the case with unlawful money in general. This amount (of interest accumulation) may be known by means of the income statement.

3) The company, whose shares one intends to purchase, must have some illiquid assets in its possession. They must not all be in liquid form (i.e. cash, cheques, bonds, etc…). If all of the company’s assets are in liquid form, then the share cannot be sold or purchased except at face value.

One point among these which I haven’t paid much heed to or couldn’t pay heed to is:

a) One should object to the interest dealings, preferably in the annual AGM. By doing so, the responsibility will be deemed fulfilled.

This is because I live in Saudi Arabia and trade shares online in the Indian Stock Markets, which means the companies i invest in are based in India while
I am a resident of Saudi and visit India for only a month or two annually. I usually sell a company’s shares within a period of 5 months. When I am in India, I won’t necessarily get to attend an AGM of the companies I am invested in during that period. Even if I might, they might be in different cities.

So far, I have sold stocks of around 7 companies making a profit in 6 of them and a loss in one of them. Currently, I am invested in just one company’s shares.

Will my responsibility be deemed fulfilled if I send an email to the 7 companies whose shares I’ve already sold off objecting their dealings in interest? Or should I give away ally my profits earned through the sale of these 6 among 7 company’s shares I’ve already sold in charity without expecting a reward in return.

Also, how am I to deal with the current company I’m invested in, in regard to objecting their interest dealings provided the fact that I might not be able to attend their AGM?

Bismillaah

A: It should be borne in mind that these listed companies’ operation and dealings are not consistent with the Shar’ee requirements in many aspects. Hence, it is not advisable for one to invest and purchase shares in them. However, since the main business of these companies are halaal, the profits will be ruled as halaal and it will not be compulsory upon you to give all the profits in charity. Nevertheless, you may study the balance sheet of the respective companies and wherever you come across wealth earned through impermissible avenues, you should give the proportionate amount of your share of the impermissible wealth in charity without the intention of receiving any reward.

And Allah Ta’ala (الله تعالى) knows best.

 

Answered by:

Mufti Zakaria Makada

Checked & Approved:

Mufti Ebrahim Salejee (Isipingo Beach)

Sidebar